The No. 2 U.S. casino company today reported a lower second-quarter profit, which fell 11 percent on weaker revenue from Midwest gambling markets including Illinois.

The Las Vegas-based company’s net income dropped to $76.7 million or 69 cents a share, despite a 7 percent gain in revenue to $1.1 billion -down 11 percent compared with $86.1 million in the same quarter a year earlier.

Cash flow (i.e. earnings before interest taxes, depreciation and amortization) fell to $283.6 million, down marginally from $284.1 million a year earlier. Company revenues increased to a second-quarter record of $1.1 million, up 6.9 percent from 1.0 million in the 2002 second quarter.

Higher taxes in Illinois, where Harrah's owns two casinos, hurt Midwest profit, the company said. Harrah's said it also faced increased competition in markets including East Chicago, Ind.

'It was a solid quarter for our company, but, frankly, not an inspiring one,' Chief Executive Officer Gary Loveman said in a conference call with Wall Street analysts. 'The performance in (our) Southern Nevada, Atlantic City and New Orleans operations continued to be strong while certain other properties were below where I'd like them to be,' he added.

'During the second quarter, Harrah's made a lot of progress on implementing TR2, its next generation player loyalty program. As players get comfortable with the new rewards program, we anticipate some market share gains to be realized in coming quarters,' said Deutsche Bank analyst Marc Falcone. 'In addition, Harrah's has begun to beta-test its own cashless slot system in several regional markets. As its Fast Cash (system) gains steam, it could gain some operating leverage in 2004,' he said.

Meanwhile Harrah's stock price dropped sharply to $38.65 after the opening bell, Harrah's stock closed at $40.26, up 76 cents or 1.92 percent, on the day's trading. Greff said the stock recovered nicely following the conference call because of positive speculation about a dividends policy.

Overall, analysts were bullish on prospects for Harrah's in the coming year.